In this article, we will discuss the 10 Tech Stocks with High Upside Potential.
As per Forrester Research, Inc., despite persistent inflation, the US real GDP is expected to increase 2.7% in 2025 and the US tech spending is projected to see growth of 6.1% to touch a staggering $2.7 trillion. The software spending in the US is expected to increase by 10.7% in 2025. With the escalation in cybersecurity risks, companies continue to leverage cloud and GenAI technologies to fuel future growth and innovation.
AI to Drive Growth in Tech Sector in 2025
The largest US stocks, also referred to as the Magnificent 7, have seen a strong run over the previous 2 years, mainly due to the buildout of AI infrastructure, says Goldman Sachs. Sung Cho, co-head of US Fundamental Equity in Goldman Sachs Asset Management. Cho believes this buildout can significantly benefit data and security companies, and software companies successfully integrating AI in their existing product set. As the Fed continues to cut rates, the smaller tech companies – which saw contraction in their multiples because of higher rates – might see a favourable macro backdrop.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Robust AI Investments are On the Horizon
UBS has highlighted how AI has and will continue to drive the growth of the broader technology sector. As per the firm, since the rollout of ChatGPT in November 2022, the total market capitalization of companies listed on the US technology exchange NASDAQ increased to ~US$13.5 trillion. Notably, around two-thirds of this value increase has been directly caused by the AI sector. Moving forward, the decisive factor is expected to be the extent to which significant investments in AI-based infrastructure can be translated into profitable business models.
While highlighting the consensus estimates, UBS stated that the 4 major US technology corporations are projected to invest ~US$280 billion in AI this year. Given the increased usage of this key technology across industries, value creation processes are expected to be optimized. This can lead to significant productivity gains. One such area is the market for robotics and automation, which is expected to reach a sales volume of ~US$350 billion in 2025, says UBS analysts. Notably, humanoid robotics will be the key area of particular interest because of the innovations.
With this in mind, let us now have a look at the 10 Tech Stocks with High Upside Potential.
Our Methodology
To list the 10 Tech Stocks with High Upside Potential, we used a screener and shortlisted the stocks catering to the broader technology sector. Next, we filtered out the stocks having an average upside potential of at least ~30%, as of February 28. Finally, the stocks were arranged in ascending order of their average upside potential. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Tech Stocks with High Upside Potential
10) Monolithic Power Systems, Inc. (NASDAQ:MPWR)
Average Upside Potential: ~30.9%
Number of Hedge Fund Holders: 51
Monolithic Power Systems, Inc. (NASDAQ:MPWR) is a critical player in the technology sector as it designs, supplies and develops high-performance power solutions which are used in a range of electronic applications. As per Stifel analyst Tore Svanberg, the company is well-placed to benefit not only as a critical power management supplier for AI infrastructure, but also as the supplier of a diverse suite of products aiming at multiple end markets. Monolithic Power Systems, Inc. (NASDAQ:MPWR) highlighted that its proven, long-term growth strategy is intact as it continues to transform from being a chip-only, semiconductor supplier to a full service, silicon-based solutions provider.
The company’s innovation pipeline is strong, thanks to the introduction of products like a silicon carbide inverter for clean energy applications and a new line of automotive audio products using DSP technology. Moving forward, Monolithic Power Systems, Inc. (NASDAQ:MPWR)’s diversified growth strategy, continued product innovation, and healthy financial position are expected to drive growth. Furthermore, with the growth of the technology sector, there will be increased demand for high-performance power management solutions. Monolithic Power Systems, Inc. (NASDAQ:MPWR), because of its strong R&D, high-margin business model and energy-efficient solutions, appears to be well-placed to capitalize on such megatrends.
Fred Alger Management, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Monolithic Power Systems, Inc. (NASDAQ:MPWR) designs high-performance power management solutions, leveraging its expertise in analog design, proprietary process technologies, and system-level applications. Its fabless manufacturing model enables nimble innovation and scalability without requiring the high volumes typical of peers with internal manufacturing. The company serves diverse end markets, including enterprise data, where it has been the sole supplier of power management integrated circuits (ICs) for Nvidia’s AI chips since early 2023, driving significant growth. However, recent reports of potential share loss on Nvidia’s Blackwell platform due to technical issues, which management refutes, have raised some concerns. While management acknowledges the eventual introduction of additional suppliers, we believe these fears are overblown.”
9) Applied Materials, Inc. (NASDAQ:AMAT)
Average Upside Potential: ~29.6%
Number of Hedge Fund Holders: 80
Applied Materials, Inc. (NASDAQ:AMAT) is engaged in the provision of manufacturing equipment, services, and software to the semiconductor, display, and related industries. Morningstar expects 8% compound annual sales growth for the company through fiscal 2029. However, it expects robust growth for Applied Materials, Inc. (NASDAQ:AMAT) in fiscal 2025 and 2026, driven mainly because of strong capacity expansions at chipmakers to supply AI demand.
Furthermore, the firm expects mid-cycle growth in the mid-to-high single digits. As per Morningstar, this growth is expected to be aided by more advanced chip designs at chipmakers relying on Applied Materials, Inc. (NASDAQ:AMAT)’s equipment to manufacture gate-all-around transistors, chiplet designs, and high-bandwidth memory. The company is expected to earn returns on invested capital well above its cost of capital for the upcoming 20 years. Applied Materials, Inc. (NASDAQ:AMAT) will benefit from drivers of chip complexity, such as gate-all-around transistors and advanced packaging.
As per Morningstar, Applied Materials, Inc. (NASDAQ:AMAT)’s proficiency in wafer fabrication equipment stems from top-notch design expertise, while its embedded services business and long-term customer roadmaps remain sticky. Vltava Fund, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“In the quarter just ended, we added to the portfolio two new companies from the technology sector: Applied Materials, Inc. (NASDAQ:AMAT) and Lam Research. Both are in the same industry as is another of our investments that we have held for some time, KLA Corporation. This industry is termed semiconductor devices and materials. One chapter in Hidden Investment Treasures is devoted to investing in technology companies and, among other things, the controversy over what really constitutes a technology company. As investors, we try to view technology companies not according to the industry into which they are formally classified but by whether the technologies and technological processes used in the production of their products and services are an essential element in value creation or if they are a source of long-term, sustainable competitive advantage. Among the companies that are formally categorized as technology-based and fall into either the Information Technology or the Communications Services sector, we find some that can be said to be just that but also others for which this classification is at least debatable. Similarly, among companies that do not formally belong to these two sectors, we find many that clearly are built to a large extent on technology and base their market positions and competitiveness on it. In the cases of Applied Materials and Lam Research, there can be no doubt that these are technology companies not only as a formality but also in fact.
Applied Materials provides manufacturing equipment, services, and software for the semiconductor, display, and related industries. Its principal business activities are semiconductor systems and Applied Global Services. Its largest customers are Samsung and Taiwan Semiconductors, but its overall clientele is more diversified than is that of Lam Research. At first glance, it would appear that Applied Materials has a somewhat less tangible and definable competitive advantage compared to KLA Corporation and Lam Research, but the numbers do not support such a view. Net margins likewise in the neighborhood of 27% and ROCE around 30% are outstanding. Basically, it can be said that all three companies we own have very similar underlying profitability metrics. Even their valuations, growth, and potential are similar. All have strong free cash flow and strong balance sheets, and they are regularly buying back their own shares over the long term and in large volumes…” (Click here to read the full text)
8) Arista Networks Inc (NYSE:ANET)
Average Upside Potential: ~34.3%
Number of Hedge Fund Holders: 78
Arista Networks Inc (NYSE:ANET) is a software and hardware provider for the networking solutions sector. Barclays upped the company’s price target to $126 from $125, keeping an “Overweight” rating on the shares. As per the analyst, Arista Networks Inc (NYSE:ANET) managed to surpass the Q4 estimates and its Q1 guidance remained above the consensus. For Q1 2025, it expects revenue of between $1.93 billion – $1.97 billion and non-GAAP gross margin of ~63%. Notably, the AI backend target of $750 million was maintained but Barclays projects upside and sees 2026 revenues doubling off that base.
Elsewhere, Morningstar believes that Arista Networks Inc (NYSE:ANET)’s strong growth over 2024 benefitted mainly from generative artificial intelligence investment, and the firm expects that AI will continue to act as a primary growth driver. The company’s high-speed switches and software-led approach remain differentiated from other networking competitors and difficult to replicate. Therefore, the strength in high-speed switching is expected to generate economic profits for Arista Networks Inc (NYSE:ANET) over the upcoming 20 years, says Morningstar. Overall, with hyperscalers and enterprises scaling their AI and cloud infrastructure, the company remains well-placed for healthy growth.
Madison Investments, an investment advisor, released its Q4 2024 investor letter. Here is what the fund said:
“The top five contributors for the quarter were Liberty Formula One, Arista Networks Inc (NYSE:ANET), Copart, Brookfield Asset Management, and Lithia Motors. Arista Networks posted another quarter of better-than-expected revenue and earnings growth. More importantly, the outlook remains robust, with promising results from its AI trials with customers on top of anticipated solid growth in the core business.”
7) Adobe Inc. (NASDAQ:ADBE)
Average Upside Potential: ~34.5%
Number of Hedge Fund Holders: 117
Adobe Inc. (NASDAQ:ADBE) operates as a technology company. Barclays reiterated an “Overweight” rating on the company’s stock with the price objective of $567 after it rolled out its public video beta via new tiered offerings, Firefly Standard and Firefly Pro. The analyst believes that this is a step in the right direction. Furthermore, Barclays opines that Firefly can now be monetized as part of a Creative Cloud subscription. To give a brief context, Firefly is a suite of generative AI-powered features for creating image content. Adobe Inc. (NASDAQ:ADBE)’s Firefly platform continues to demonstrate healthy user engagement.
Through providing AI-enhanced features as premium add-ons or via tiered pricing models, Adobe Inc. (NASDAQ:ADBE) is expected to increase average revenue per user and bring new customers looking for cutting-edge creative tools. Furthermore, the integration of Firefly into Adobe Express makes it simpler for SMBs and non-designers to develop content of improved quality. This can help Adobe Inc. (NASDAQ:ADBE) penetrate the digital content creation market, such as influencers and social media marketers.
Polen Capital, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“We added to several existing positions in the quarter including Adobe Inc. (NASDAQ:ADBE), Workday, Shopify, MSCI, and Paycom Software. We feel Adobe is poised for re-accelerating revenue and earnings growth partially due to the monetization of its Firefly GenAI product embedded in its creative software.”
6) Datadog, Inc. (NASDAQ:DDOG)
Average Upside Potential: ~37.2%
Number of Hedge Fund Holders: 83
Datadog, Inc. (NASDAQ:DDOG) is a technology company that specializes in cloud-based monitoring, analytics, and security for modern IT infrastructure. Analyst Andrew Sherman of TD Cowen reiterated a “Buy” rating on the company’s stock, providing a price target of $165.00. The strong performance and promising outlook continue to support the analyst’s buy rating. The analyst has deemed Datadog, Inc. (NASDAQ:DDOG)’s commentary on AI-native systems, log solutions, and sales capacity expansion as optimistic, highlighting further growth potential.
Additionally, the analyst sees revenue guidance as conservative, reflecting strong upside, and noted that the sales and marketing expenses are projected to increase as Datadog, Inc. (NASDAQ:DDOG) ramps up hiring, highlighting robust demand. The management’s emphasis on AI-native solutions and competitive advantages in log management continues to play a crucial role in the favourable outlook. Datadog, Inc. (NASDAQ:DDOG) remains well-placed to benefit from favourable technological trends, including expansion of cloud computing, DevOps, and AI adoption, which continue to fuel demand for real-time monitoring, security and observability solutions.
Brown Capital Management, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“Other examples of negative sentiment include portfolio companies that reported earnings that met or exceeded expectations, but only saw their share prices go up slightly, stay flat or even decline. For example, Datadog, Inc. (NASDAQ:DDOG) is a leading SaaS-based, information technology (IT)-monitoring and analytics software platform for developers, IT operations and business users. The platform automates the monitoring of infrastructure, applications databases, networks, logs and security. Datadog’s platform is differentiated by providing a unified view of these systems via a visual interface configured to the needs of each user (i.e., a single pane of glass). Datadog delivered solid operating results in the second quarter of 2024, reporting revenue growth of 27% and raising 2024 full year revenue, operating income and earnings guidance. Despite these solid fundamental results, Datadog’s share price was down 11.8% in the third quarter. We speculate that these market reactions are evidence of the negative environment for high-growth companies. For more, please see the Detractors section below.
Datadog, mentioned above, automates the monitoring of infrastructure, applications databases, networks, logs and security. The company delivered solid operating results in the second quarter of 2024, reporting revenue growth of 27% and raising guidance for 2024 full-year revenue, operating income and earnings. Datadog noted improving consumption and demand trends among its enterprise customers and stabilizing trends among its small and mid-sized customers. On its earnings call, Datadog management disputed that it has interest in large acquisitions, notwithstanding news articles on July 17 that Gitlab was seeking a buyer and Datadog is among the potential suitors. Despite solid fundamental results, Datadog’s share price underperformed in the third quarter of 2024. This may be due to its premium valuation and investor worries about Datadog’s ability to sustain its current strong revenue growth in a softer economic environment. We remain confident in Datadog’s ability to deliver durable growth over the long term. We believe Datadog has a massive and underpenetrated total addressable market that is growing about 10% annually. We also believe Datadog has a strong competitive positioning in infrastructure monitoring and is gaining market share.”
5) NVIDIA Corporation (NASDAQ:NVDA)
Average Upside Potential: ~40%
Number of Hedge Fund Holders: 223
TD Cowen analyst Joshua Buchalter reiterated the bullish stance on NVIDIA Corporation (NASDAQ:NVDA)’s stock, offering a “Buy” rating on February 25. The rating is backed by a combination of factors highlighting its healthy market position and future potential. As per the analyst, the demand for Blackwell products is projected to remain strong, which can alleviate some of the market’s concerns. Furthermore, NVIDIA Corporation (NASDAQ:NVDA)’s advancements in AI infrastructure, mainly with model innovations and optimizations, placed it well for future growth.
The analyst believes that the flexibility of Blackwell systems to serve training and inference needs, together with the company’s comprehensive software ecosystem, reinforces its competitive advantage. Elsewhere, Stacy Rasgon from Bernstein maintained a “Buy” rating on the company’s stock with a price objective of $185.00. NVIDIA Corporation (NASDAQ:NVDA) has highlighted that it has ramped up the massive-scale production of Blackwell AI supercomputers. Furthermore, AI continues to advance at light speed, with agentic AI and physical AI setting the stage for the next wave to revolutionize the largest industries.
For Q1 2026, NVIDIA Corporation (NASDAQ:NVDA) expects revenues of $43.0 billion, plus or minus 2%. Baron Funds, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“NVIDIA Corporation (NASDAQ:NVDA) is a fabless semiconductor company specializing in compute and networking systems for accelerated computing and AI. Shares increased 10.6% for the quarter and were up 170.3% in 2024, on strong quarterly results, with record data center revenue, which surpassed $30 billion, driven by demand for its Hopper GPUs, while Gaming and Automotive also beat expectations. Key investor debates include the continued progress on improving the capability of AI models (e.g. scaling laws – see more in the outlook section below), transition from AI training to inference and the potential impact on competitive dynamics, and the pace of adoption of AI across industries. Despite near-term uncertainties, we maintain conviction in NVIDIA’s leadership in accelerated computing, driven by its ability to innovate and adapt to market shifts. With robust margins, a dominant data center presence, and a growing ecosystem across hardware and software, we believe NVIDIA is well positioned to capitalize on the structural growth in AI and high-performance computing.”
4) Advanced Micro Devices, Inc. (NASDAQ:AMD)
Average Upside Potential: ~40.2%
Number of Hedge Fund Holders: 96
Advanced Micro Devices, Inc. (NASDAQ:AMD) is a leading player in the technology company, which specializes in designing and developing semiconductors, graphic solutions, and computing processors. The company continues to make significant strides with its MI300 Series accelerators. Its focus on offering high-performance, energy-efficient solutions for AI training and inference workloads has resulted in strong attention from major cloud service providers and enterprise customers.
The company’s open-source approach with its ROCm software platform has the potential to attract developers and foster a diverse ecosystem. Furthermore, Advanced Micro Devices, Inc. (NASDAQ:AMD)’s acquisition of Xilinx offers additional opportunities in AI inference and edge computing applications, which can help it address a range of AI workloads and use cases. The integration of Xilinx’s field-programmable gate array (FPGA) technology and embedded processing solutions provides numerous cross-selling opportunities. Therefore, given its strong position in semiconductors, graphics and AI accelerators, Advanced Micro Devices, Inc. (NASDAQ:AMD) is well-placed to benefit from the broader technological trends.
The rapid growth of AI, cloud computing, high-performance computing and gaming continues to fuel demand for the company’s EPYC server processors, Instinct AI GPUs and Ryzen AI-powered chips, supporting Advanced Micro Devices, Inc. (NASDAQ:AMD)’s expansion in AI workloads, data centers and next-gen computing.
3) Synopsys, Inc. (NASDAQ:SNPS)
Average Upside Potential: ~41.0%
Number of Hedge Fund Holders: 72
Synopsys, Inc. (NASDAQ:SNPS) is a leading player in the technology landscape as it specializes in electronic design automation, software security and semiconductor IP. Morgan Stanley analyst Lee Simpson gave a “Buy” rating on the company’s stock, setting a price target of $590.00. The rating is backed by a combination of factors demonstrating Synopsys, Inc. (NASDAQ:SNPS)’s strong performance and strategic positioning. Despite the slowing growth in China, the company showcased strength in other areas, mainly in its hardware segment, supporting it in maintaining FY 2025 guidance. For FY 2025, it expects revenue in the range of $6,745 million – $6,805 million.
Synopsys, Inc. (NASDAQ:SNPS)’s refreshed hardware portfolio drove improved hardware demand, resulting in the positive outlook. The analyst further highlighted that the valuation reflects a premium to the overall semiconductor sector. However, this is justified by Synopsys, Inc. (NASDAQ:SNPS)’s software-centric business model and its exposure to growth areas including AI-enabled tools and digital chip innovation, opines the analyst. Overall, the growth of AI, 5G, high-performance computing and autonomous vehicles continues to increase demand for advanced chip design, fueling adoption of the company’s EDA (Electronic Design Automation) tools and semiconductor IP.
Parnassus Investments, an investment management company, released Q3 2024 investor letter. Here is what the fund said:
“Synopsys, Inc. (NASDAQ:SNPS) plays a crucial role in optimizing semiconductor processing power beyond physical design limits. It benefits from companies like Google and Amazon designing their own chips and the proliferation of AI accelerator development. Its proprietary EDA technology and rising demand for custom chips and AI accelerators should drive durable revenue and earnings growth.”
2) Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Average Upside Potential: ~41.2%
Number of Hedge Fund Holders: 186
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures, packages, tests, and sells integrated circuits and other semiconductor devices. Bank of America Securities analyst Brad Lin reiterated a “Buy” rating on the company’s stock, providing a price target of $250.00. The analyst believes that Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s gross profit margin is expected to see improvement, courtesy of price increases, yield improvements, and a favorable product mix. Its dominant position in the semiconductor industry is mainly aided by its technological leadership. It has remained at the forefront of developing and implementing advanced manufacturing processes, enabling the company to sustain its competitive edge.
The elevated demand for AI-related chips resulted in higher orders for Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s most advanced manufacturing processes. This trend has been fueling innovation in chip design and manufacturing techniques. Moving forward, the company’s continued leadership in advanced manufacturing processes places it well for healthy future growth. As the chip design complexity increases, the number of companies that can manufacture at the advanced nodes decreases. This trend supports Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s strengths, resulting in higher market share and increased profit margins.
Wedgewood Partners, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was another top contributor to performance during the quarter and for the year. The Company’s earnings growth dramatically accelerated compared to last year as the Company’s wafer fabrication and packaging volumes soared in 2024. In addition, the Company customer prices rebounded in the face of more normalized capital expenditures. The Company maintains a near-monopoly in the fabrication of nearly every new AI accelerator brought to market over the past two years. They continue investing tens of billions to build and 7ill future capacity with orders for what seems to be insatiable hyperscale demand for accelerated computing. The stock ended the year trading at a consensus forward earnings multiple that is several points lower than large cap growth benchmarks, despite the Company’s dominant position in the most important industry that is driving one of the largest technological shifts in a generation.”
1) The Trade Desk, Inc. (NASDAQ:TTD)
Average Upside Potential: ~63.5%
Number of Hedge Fund Holders: 63
The Trade Desk, Inc. (NASDAQ:TTD) operates as a technology company, providing a cloud-based, AI-driven platform for programmatic advertising, allowing organizations to purchase and optimize digital ad placements. The Connected TV (CTV) market reflects a significant growth opportunity for the company. With viewers shifting from traditional linear TV to streaming platforms, advertisers continue to follow, and are shuffling budgets to reach these audiences effectively. The Trade Desk, Inc. (NASDAQ:TTD) established robust partnerships with major CTV platforms and content providers, placing it at the forefront of such transition.
The Trade Desk, Inc. (NASDAQ:TTD)’s CTV operating system, Ventura, and the supply path optimization capabilities provide it a competitive advantage in this ever-evolving segment. The advertisers who are looking for a unified approach to reach audiences through multiple streaming services can find The Trade Desk, Inc. (NASDAQ:TTD)’s offering appealing. With the world’s leading advertisers shifting to premium scalable channels in contrast to the limitations of user-generated content, there remains a significant opportunity. Moving forward, the company is well-placed to help its clients take full advantage of data-driven advertising on the premium internet.
With the growth in the broader technology industry, advertising has become automated, AI-powered and data-driven. The Trade Desk, Inc. (NASDAQ:TTD) remains at the forefront of this transformation as it continues to benefit from the expansion of streaming, AI, and retail media. Rowan Street Capital, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“The Trade Desk (TTD): Investment Initiated: March 2020
Internal Rate of Return (IRR): 54%
The Trade Desk has been our most successful investment to date. March 2025 will mark five years since we opportunistically initiated our position at a cost basis of $17.40 (split-adjusted). Since then, TTD has appreciated more than sevenfold, delivering an annualized return of approximately 54%.
These exceptional results far outpace the company’s strong fundamental growth, with revenues and earnings compounding at approximately 25% annually over this period (refer to the table below). The primary reason for this outsized return lies in the price at which we were able to acquire TTD during the early days of the pandemic, when market fears briefly drove it down to just 10x revenues. Today, the valuation has expanded significantly to approximately 25x revenues, amplifying our returns…” (Click here to read the full text)
While we acknowledge the potential of TTD as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than TTD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
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